Making an Offer and Paperwork is the begin to purchase a property. How to do that, who does what - purchase offer, negotiation, conditional contract and the next step of the house buying process
House Buying Process
Making an Offer and Paperwork
Your offer - Paperwork
After attending open homes, speaking to selling agents and your pre-offer inspection you would feel confident to give it a go. Why not? At this stage you don’t lose anything apart from spending time. For doing the paperwork the agent has everything to fill in the sales & purchase contract form (your offer). Your preparations are focused on the due diligence clause(s) giving you extra time after accepting the offer by the seller.
Remember previous articles, the role of the seller’s agent, the importance of your due diligence clause, and everything written on the Sales & Purchase Agreement is legally binding when both parties signed the contract. Your offer is the starting point for a legal document and carefully prepared—you agreed with each clause.
To minimize costs, I take legal advice during my due diligence. Depends on the pre-offer inspection I write my own DD clause(s), but make them to subjects of my lawyer’s approval. In most cases a generic DD clause is sufficient. If it is your first offer, I would advise you to talk it through with a lawyer.
What to put on paper in your offer?
Following items to be checked and filled in:
· The purchaser's details
· Purchase Price, that is your price offer (make sure inclusive GST)
· When is the payment due? (normally in one lump sum on settlement)
· Date for settlement and possession, ensure that is clearly understood
· Vacant possession, important if the house is rented
· Dollars for deposit and date to be payable (normally on unconditional date)
· Cross out conditions you do not like and
· Add Conditions you want to be fulfilled before the contract becomes unconditional (your list of DD clauses)
· Request a chattel list (to be specified by models/brands) you confirm by inspection
· Condition of the property (cleared out all rubbish, chattels in good working order, etc)
· Include a sunset clause, setting an expiry date on an unconditional offer, otherwise the seller could conveniently come back to you maybe in 2 years time.
· Access rights, to do your due diligence
TIP - Every extra clause you put in could make an offer appear to be more cluttered, that is why I prefer a generic DD clause to cover all the important details such as
· Title search (done by your lawyer to check who the legal owner of the property is, easements, etc)
· Finance (time for obtaining a home loan)
· Building inspection
· Engineer’s reports for the land and structure of the property
· Valuation report (normally required by the bank/lender)
· LIM report, Land Information Memorandum
· Insurance from the day of settlement
Again have another look through the posts outlining the due diligence process. I would urge you to talk through your offer with your lawyer.
Tips to reduce your expenses and motivate the seller
Avoid huge lawyers bills
Lawyers tend to take over to advise on Title search, LIM report etc. Don’t do that before the seller has accepted your offer. When the seller declines your offer, you will have bills to pay but no house to buy.
Do not engage professionals before acceptance
Remember building inspection, LIM, valuation, etc you have to pay for these services. I would start spending money during the due diligence and after the offer has been accepted. See due diligence process.
Avoid being seller’s agent slave
The seller’s agents are indeed helpful, but their keen interest is you to sign the contract and pay the deposit into their trust account. Remember, the driver of the buying process is YOU!
Get the seller attention
Don’t be complicated when launching your starting offer. Few simple clauses indicate that you are a serious buyer. If the vendor becomes a hard negotiator, you will adapt by adding or removing conditions along your way.
What happens after you launched your offer?
Keep in contact with the seller’s agent. Expect three possible responses:
· The vendor (seller) accepts your conditional contract. You move on to the next step of the buying process (Due diligence process).
· The vendor rejects to respond, takes the counter-offer on hold, or leaves it open to proceed (solution—remember the sunset clause)
· The vendor makes a counter-offer for the next round.
Negotiating a Sales & Purchase Agreement is sometimes tricky, experiences come by doing it. Don’t be discouraged getting a refusal. You always have the chance to return with a redefined offer. Your position and your budget is not carved in stone. Good luck.
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